The Czech government is expected to approve a new state budget proposal for year 2002. The finance ministry cut the overall budget deficit by approx. CZK 6bn by lowering the expected loss of the state bad-debt agency ČKA. However, this only shifts costs of restructuring to next years, which happen to be after the 2002 parliamentary election.
The government should announce yet another deadline for privatization of the dominant fixed-line operator, Český Telecom. This time, the government wants to unload its 51% by March 2002 (you bet, just before the election). The sale looks tro be complicated by the eagerness of the minority "strategic" shareholder, Dutch-led consorcium Telsource, to onload its 33% as well. Moreover, the Český Telecom is in the middle of negotiations with the mobile operator EuroTel about acquiring 50% of its shares it does not own yet.
In an interesting discussion, sponsored by the IMF, the CNB's vice-governor Niedermayer questioned proclaimed need for higher inflation in a transition country. He was supported in this by a former vice-governor Kysilka (now of Erste-Česká spořitelna). The finance ministry official presented at the discussion was very vague concerning the fiscal policy outlook while she openly ackowledged its frightening consequences.
Czech bonds gained on Friday trading, as the Czech National Bank newly discovered bias towards lowering interest rates made Czech bonds attractive. Especially long.term bonds experienced a rally, as the 15Y bond gained 170 bps.
Meanwhile, the Czech koruna lost vis-a-vis the US dollar that firmed its position below the 0.90 USD/EUR level again. The koruna gained 0.1% vis-a-vis the euro, recovering from the Thursday's CNB intervention.
(Ondrej Schneider)